Buy-to-Let Flat in a New Build: Rent, Yield and Risks

A buy-to-let flat in a new build can provide regular rental income and low repair costs in the first years. However, the yield depends not only on the price of the flat and the level of rent, but also on financing, the owner's costs, occupancy and taxation. Before buying, it is therefore worth calculating several scenarios, not just the best one.

What makes up the rental yield

The return on a buy-to-let flat is usually assessed from two sides. The first is regular rental income, the second is the change in the property's value over time. The second part cannot be predicted reliably, so it is sensible to base decisions mainly on the first.

The basic procedure is simple:

1. Find out the realistic monthly rent for similar flats in the same location (size, layout, condition, parking).
2. Deduct the owner's regular costs: the contribution to the repair fund, management, insurance, property tax and any fees for arranging the tenancy.
3. Allow for periods when the flat will not be let, for example when tenants change.
4. If you are buying with a mortgage, deduct the repayments and interest, and check whether the income covers the monthly burden.
5. Compare the result with the purchase price, including additional costs and furnishing.

Gross yield (annual rent divided by the price) looks better than net yield. When comparing offers, always use the net yield after all costs. The calculator can help with an indicative calculation of repayments, but check the specific financing terms with a mortgage specialist.

Why a new build, and how it differs from an older flat

A new build has several practical advantages for a landlord. The flat usually needs no renovation, the technical equipment is new and the building generally meets current energy requirements, which is reflected in running costs. Tenants also often prefer modern layouts and amenities, such as a cellar, balcony or parking space.

On the other hand, there are several specific points to consider:

• Waiting for completion. Until the flat is handed over you have no income, but you may already be paying instalments or repayments.
• Furnishing. Flats are usually handed over without a kitchen unit and other furnishings. Letting often requires at least basic furnishing.
• Competition in the same building. Several flats in one new build may be offered for rent at the same time, which puts pressure on the rent and on how long it takes to find a tenant.
• Price of newness. A new flat is usually more expensive than a comparable older one, which lowers the ratio of rent to price.

Choosing the location and layout

Rental demand is determined mainly by accessibility: transport links, services, employers and schools in the area. When choosing, focus on who your typical tenant will be. Smaller flats usually appeal to individuals and couples, larger ones to families and longer-term tenants. Smaller layouts tend to see more frequent tenant turnover, while larger ones tend to have longer tenancies.

Compare several places and try to find out how long similar flats in the area take to let. An overview of cities and districts can be found in the locations section, and the offer of specific flats in the project catalogue. Also pay attention to planned construction in the area, which may increase the supply of rental flats but may also improve local amenities.

Main risks and how to limit them

Risk	What it means	How to proceed
Construction delay	Rental income starts later, while the mortgage may be drawn earlier	Check the contractual deadlines and penalties for delay, and consult a lawyer
Vacancy	Months without rent while costs continue	Plan for a financial reserve and a conservative scenario
Change in interest rate conditions	Repayments may differ after the fixed period ends	Calculate the burden for less favourable conditions too
Problem tenant	Unpaid rent, damage to the flat	A good tenancy agreement, a deposit, tenant screening
Defects in the work	Claims after handover of the flat	A careful handover protocol, monitoring of warranty periods
Changes in legislation and taxes	Taxation or letting rules may change	Consult a tax adviser on an ongoing basis

Have a lawyer review the contract for a future purchase contract, the reservation agreement and the payment terms before signing. Focus on when and under what conditions each part of the price is paid and what happens if you withdraw. The general steps of buying are summarised in the buying guide.

Taxes, financing and managing the flat

Rental income is generally taxable, and the way it is taxed depends on your situation, for example whether you own the property as an individual or through a company, and on the level of your other income. The possibility of claiming costs or mortgage interest also differs from case to case. Do not rely on general examples; have a tax adviser calculate your situation before you buy.

When financing a buy-to-let flat, banks often assess applicants more strictly than when buying a flat to live in. The conditions, the required own contribution and whether the bank counts the expected rent as income all vary, so it is a good idea to compare several offers through a mortgage specialist.

Also decide whether you will manage the flat yourself. Management includes finding tenants, handing over the flat, dealing with defects and settling service charges. If you live elsewhere, a professional manager may be worthwhile, but their fee reduces the net yield and must be included in the calculation.

A practical procedure before buying

1. Decide whether the aim is regular income, preserving value, or your own residence later.
2. Choose a location and shortlist offers in the catalogue; also look at the developer's experience with completed projects.
3. Calculate the net yield for an optimistic, a typical and a pessimistic scenario.
4. Arrange a preliminary assessment of financing and tax consultations.
5. Have the contracts reviewed by a lawyer.
6. If you want help with choosing, use the housing enquiry.

Frequently asked questions

Is it worth buying a buy-to-let flat before it is completed?

It can be more advantageous in terms of price or choice of unit, but you bear the risk of delay and have no rental income. Consider whether you can meet your obligations even with a longer wait.

Should I expect the rent to cover the mortgage repayment?

This cannot be assumed. If you can cover the repayment only in an ideal scenario, the plan is fragile. Keep a reserve for months without a tenant and for unexpected expenses.

Who deals with repairs in a let flat?

The division of minor repairs and larger defects is governed by the tenancy agreement and the law. Check the details with a lawyer and set up the agreement so that it is clear what the tenant pays for and what you pay for.